Renewables Make German Power Market Design Defunct, Utility Says

Renewable generation, such as wind and solar, receives support from the German government in the form of a feed-in tariff, or FIT. Because there are no costs associated with the wind and sunshine, renewables have a generating margin of zero, as well as legally mandated priority access to the grid. As a result, fossil fuel-fired plants are generating for fewer hours and selling their power at cheaper prices, making them less profitable. “As long as renewables have zero margin costs, the market design we have doesn’t work,” Jens Teresniak, team manager for business development and market analysis at Stadtwerke Leipzig, said in an interview in Leipzig on June 21. “Capacity markets could be a solution.” So-called capacity markets allow utilities to fix prices for guaranteed backup power supply in advance, boosting margins for gas and coal electricity plants as renewables outpu...